The rapid adoption of artificial intelligence (AI) has given tech stocks a major boost in recent years, evidenced by the 77% gain the US economy has seen. Technology sector Nasdaq-100 indexing during this period. But not all tech stocks have benefited from the AI-driven rise in the technology sector.
Zoom video communication (NASDAQ: ZM) And Twilio (NYSE: TWLO) are two such names. While Zoom shares are down 8% in recent years, Twilio has gained a paltry 13%. Both companies have seen a significant slowdown in their operations in the wake of the pandemic, but now they are both looking to revive their growth with the help of AI.
Let’s take a closer look at the AI-related prospects of both Zoom and Twilio and see which one could be a better AI stock to buy now.
The case for Zoom Video Communications
Zoom is known for its communications platform that allows users to connect with each other through various modes such as video, audio, chat and voice. The company’s videoconferencing platform gained popularity during the pandemic, when working from home and online education surged in popularity.
However, as the following chart shows, the company’s recent growth hasn’t been as rapid as it was during the pandemic.
ZM earnings (annual) data by YCharts
For example, in the second quarter of fiscal 2025 (which ended July 31), the company’s revenues rose just 2.4% year over year to $1.16 billion. Non-GAAP net income rose just 3.7% year over year to $1.39 per share. Consensus estimates aren’t too optimistic about Zoom’s growth either. Revenue is expected to improve just 2.5% to $4.64 billion in the current fiscal year.
Even the long-term prospects don’t look that bright, with analysts expecting corporate results to rise at a compound annual growth rate of just 1.5%. However, it is worth noting that the integration of AI tools within the Zoom platform could lead to better customer spend and customer base growth.
The company introduced an AI assistant known as Zoom AI Companion in September last year and has since made improvements to this platform. Zoom has introduced a number of AI-driven features to improve the usability of its offering, from allowing users to compose responses to chats to catching up on meetings already in progress and generating meeting summaries.
Zoom recently introduced the 2.0 version of its AI Companion, which allows users to summarize and access information from multiple workplace collaboration apps, such as Microsoft Outlook, Google Calendar, Gmail and others. The updated AI assistant also helps users decide their next steps after meetings, along with multiple other features such as generating new content.
Zoom’s AI features are gaining popularity among customers, as management noted during the August earnings conference call. This probably explains why customers are now spending more money on the platform. The number of customers who contributed more than $100,000 in trailing-12-month revenue in the previous quarter increased 7% year over year.
As a result, the company’s remaining performance obligations (RPO), which refers to the total value of a company’s future contracts yet to be fulfilled, rose 8% year-over-year to $3.78 billion. The faster increase in RPO compared to Zoom’s revenue growth is a sign that its growth rate is likely to improve in the future.
Not surprisingly, Zoom raised its full-year revenue guidance when it reported earnings in August. Analysts also recently raised their earnings growth expectations for Zoom.
ZM EPS estimates for current fiscal year data according to YCharts
Considering that the global workplace collaboration applications market is expected to double in size to $71.6 billion by 2027, according to market research firm IDC, Zoom has a solid incremental growth opportunity that it could tap with the help of AI.
The case for Twilio
Twilio made a name for itself by helping customers move their contact centers to the cloud, and the company experienced incredible growth after going public in June 2016. However, Twilio has seen a sharp slowdown in its growth lately, although it can’t be denied that things have started to look up.
The company’s third-quarter 2024 revenue rose 10% year over year to $1.13 billion. Twilio predicts full-year organic revenue growth to be between 7% and 8%. By contrast, analysts expect total revenue to rise just 6% to $4.42 billion. However, the forecast for the coming years points to a slight acceleration in growth.
TWLO revenue estimates for current fiscal year data based on YCharts
Twilio’s AI offering helps its customers reduce customer acquisition costs and improve customer lifetime value. Considering that Twilio already has a huge active base of 320,000 customers, it is well-positioned to sell its new AI offering to them and win a bigger share of their wallets.
The company’s AI-focused offerings such as CustomerAI help its customers use the customer data platform to better understand customer behavior, leading to improved engagement and sales. Twilio’s dollar-based net expansion rate of 105% in the third quarter indicates that its existing customer base is spending more money on its offerings.
This metric compares the revenue generated by Twilio’s customers at the end of a given quarter to the revenue generated by the same customer base in the previous year. So a score above 100% means those customers have increased their use of the Twilio platform or adopted more of its solutions.
More importantly, the company is also moving into new AI-focused niches that could help it tap into billion-dollar markets, such as conversational AI assistants. All in all, it won’t be surprising to see an uptick in Twilio’s growth in the future due to its AI-focused efforts and solid customer base.
The verdict
It is now clear that there is not much difference between Twilio and Zoom. Both companies are currently growing slowly, although Twilio is growing slightly faster. As for valuation, while Zoom trades at five times sales, Twilio has a price-to-sales ratio of 3.4. Both companies’ forward earnings multiples are also on the cheap side, as the Nasdaq-100 The index has a price-earnings ratio of 30.
ZM PE ratio (forward) data by YCharts
The bottom line is that both Zoom and Twilio are cheap stocks to buy right now, and their growth could accelerate in the future because of AI. So investors might consider buying either of these two stocks, although those looking for better value and slightly faster growth might be tempted to buy Twilio instead of Zoom.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Microsoft, Twilio, and Zoom Video Communications. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
